The Firm recognises that the wide investing experience and country, sectoral, functional and macroeconomic expertise within the Investment Team can only be truly leveraged effectively if they are pulled together, codified and strongly integrated into the core investment process. Hence the Firm has distilled the collective institutional knowledge, experience and expertise of its team members into a set of investment rules, heuristics and methodologies embedded into the processes of the super-infrastructure, for example the “zero-dog” policy.
The Firm believes it is one of the early adopters of building proprietary mid-market and macroeconomic databases, and applying quantitative filters, computational analytics and artificial intelligence techniques to its in-house mid-market database of c. 18,000 companies in Core Countries to identify, screen and assess investment opportunities, benchmark the performance of portfolio companies to identify and validate operational improvement opportunities, as well as screen for exit opportunities.
The Firm develops and applies proprietary methodologies derived from the Firm’s collective pooled knowledge, experience and expertise to the different stages of the investment process, including:
Macroeconomic Analysis & Country Allocation (“MACRO”) is a fundamental research approach for identifying macroeconomic themes and strategies to guide the Firm’s country allocation strategy and risk management;
Acquisition Research on Targets (“ART”) is a fundamental acquisition research approach for identifying investment targets within highly-focused themes based on the Firm’s proprietary Deal Generators (“DG”), including sector deep dives, secular trends and other proprietary themes. ART is undertaken in-house as well as in collaboration with leading consulting firms and universities;
Strategic Portfolio of Targets (“SPOT”) is a screening and assessment methodology that centrally assesses and ranks potential investments based on the Firm’s investment rules to ensure that the Firm consistently adheres to its “zero-dog” policy and invests in attractive companies with strong value creation opportunities, and minimise country/sector bias in the decision-making process; and
Functional Improvement and Transformation (“FIT”) is a methodology for carrying out incremental sector-agnostic Functional Improvement focusing on four functional areas of (i) Digitisation, (ii) Accounting Systems, (iii) Advertising and (iv) Innovation as well as co-ordination and project management of the more intensive sector-specific Transformation initiatives usually with the use of external resources e.g. recruitment of industry CEOs or the use of McKinsey for strategic foresight for sector strategies.
Houghton Street Partners believes the ability to source good deals through intensive research leveraging its ICCM super-infrastructure is a critical part of its investment process that provides a strong competitive advantage, given that the Firm operates in an under-researched market with few or no professional intermediaries. This allows Houghton Street Partners to minimise reliance on competitive situations such as auctions, “intermediated-turned-proprietary transactions” and limited intermediary deal flow, ensuring that it is able to maintain pricing discipline in its investment decisions. The Firm achieves this through its heavily invested ICCM super-infrastructure which has at its core an artificial intelligence predictive system driven by investment rules, databases and fundamental research that guides the origination of high quality investments as well as generation of operational improvement and exit opportunities in the portfolio monitoring and exit stages.
The ICCM super-infrastructure comprises three core elements: